Separation is never easy — especially when it comes to deciding what happens to the family home. Common situations we see are buying your partner out, using the sales proceeds to get an investment property or even starting fresh in your own home.
Often we see 2 things that happen to joint property after a divorce.
- The properties are sold and profits are split between the couple
- One couple buys out the property from the other
Properties are sold and profits are split
In this scenario the profits could amount to a sizeable deposit. This only leaves the issue of income and expenses. You would need to present to a lender your income sources, being PAYG, Centrelink income or child support if you become the primary carer for any children. These need to be documented and be able to be evidenced to a lender.
Buying out your partner
The biggest issue we see when buying out a property from your partner is not having the income to support the debt. So often, individuals opt to buy out their partner but convert the property to an investment property until they are in a position to service the loan independently. But given there is the income and equity to support the purchase, buying out your partner’s share of the property is definitely possible.
Remember, you will need to consider stamp duty costs from buying out your partners share if applicable to your circumstance.
Children
Children play a big part in purchasing a home post settlement for the reasons of
- Number of dependents
- Child support expense or income
If you are the primary carer of your children you would need to declare the children as your dependents. This would bring down your borrowing capacity as lenders would place an expense allowance for each child you are a dependent off. However if you will not be a child’s primary carer often they are not regarded as your dependent. However, likely you would still carry the expense of the child in the for of child support.
Child support is considered by lender as a liability (for the same of simplicity). This means that is you are paying $100 per week in child support, this would be an increase in expenses by $100 per week and ultimately decrease your borrowing power. On the contrary, if you were receiving child support then this could be included as income, but would typically need to be ongoing for at least 5 years.
TIP: If you have a private rental agreement you require bank statements to evidence your child support income so make sure the bank statements show consistent payments of child support
Government help
Other than increasing your income by showing any Centrelink income you may receiving, you could also use the Family Home Guarantee Scheme in order to purchase your home. With this scheme, single parents only require a 2% deposit to avoid paying Lenders Mortgage Insurance. However, you are required to be a carer of a dependent child. This scheme may assist you into getting into your home post divorce if you are struggling with a deposit. However, as with any government scheme, there are eligibility criteria.
Housing Affordability Solutions
Housing Affordability Solutions (HAS) is a lender who specialises in assisting single parents & post divorce applicants. They utilise your existing super to use as a deposit through an SMSF investment solution. It is a complex set-up but can help divorcees’s as they tend to have a large superannuation balance. HAS looks to make your superannuation balance accessible through an SMSF structure. Because your superannuation is ‘invested’ into deposit through your SMSF, they also bring returns as with a traditional superfund. However, it is a complex set-up so it is best speak to a professional to help guide you through their offerings. Have a look at the webiste: https://yourhas.com.au/
Going through a divorce can make you feel like you have no options. However there are always options, especially with the many niche lenders available. It all comes down to the individual’s circumstances and goals. Visit our Divorce Settlements Page to get more information: https://2kfinance.com.au/divorce-settlements/. Alternatively get in touch with a mortgage broker specialist.
